Do We Have a Cronyism Problem?

Republished with Permission

Bryce Edwards
I am Political Analyst in Residence at Victoria University of Wellington, where I run the Democracy Project and am a full-time researcher in the School of Government.

A scandal is raging in the UK over the new Labour government’s appointment of friends, allies and donors into high positions in the British state. Prime Minister Keir Starmer is being accused of heading a ‘cash for jobs’ arrangement in which party donors have been given government appointments. The terms cronyism and chumocracy are being thrown around liberally.

The scandal has tarnished the two-month-old administration. According to the Spectator magazine, Starmer’s approval rating has quickly dropped: “Sir Keir’s approval rating has plummeted by 27 points, falling from a post-election peak of +11 to a rather dismal -16. More than that, almost two-thirds of Brits believe the new Labour government is more ‘interested in helping themselves and their allies’ than the general public – while a majority of those surveyed consider Labour to be ‘somewhat’ or ‘very’ corrupt.”

Meanwhile, here in New Zealand, the debate continues over the political appointments being made to public sector roles by the new coalition government. Regular announcements continue to be made about former National politicians and associates being given plum jobs.

Unfortunately, this isn’t being strongly politicised, because all the Opposition parties have also been in recent governments that have handed out similar positions to cronies. This lack of attention, together with a shrug of the shoulders from other observers, means that New Zealand risks being somewhat more complacent than the British public, who seem more outraged by integrity deficits in their politicians.

The “bro-reaucracy” is back – Cataloging the appointments

Cronyism simply refers to displaying loyalty to friends and colleagues by appointing them to positions of authority without necessary merit. Deputy Prime Minister Winston Peters labelled it the “bro-reaucracy” back in 2014 – riffing on the other terms for cronyism, such as “jobs for mates”, “the old boys club” or “chumocracy”.

Back then, Peters was hitting out at the John Key National-led government, which had made many questionable appointments. For example, in that year, Shane Jones had been poached from the Labour Party frontbench, to be the Government’s Ambassador for Pacific Economic Development – a newly created position, that was viewed by critics as a smart way of getting one of eliminating National’s strongest opponent from the political arena.

Since, then there has been a decade of questionable political appointments involving all the political parties now in parliament. Jobs, ranging from high diplomatic posts through to chairs of Crown entities have been given to partisan allies. And there’s reason to believe that each subsequent government is a worse offender than the one before them.

Indeed, there a large number of egregious political appointments have been made in the first year of the coalition government. And yesterday, Herald political journalist Derek Cheng published a list of some of the more interesting choices in his article titled “Which former National MPs have been chosen for important government positions?”

Here’s his list:

Paula Bennett: Chairwoman of Pharmac
Simon Bridges: Chairman of NZTA Waka Kotahi
Bill English: Lead reviewer of Kāinga Ora
Steven Joyce: Leading a panel advising the Treasury on the design of a new infrastructure
Murray McCully: Leading the ministerial inquiry into the Ministry of Education’s cost blowouts on school property
Roger Sowry: On the ministerial review team looking into KiwiRail’s interisland ferry service
David Bennett: On the board of TAB NZ, and appointed deputy chairman of the Callaghan Innovation Board

In terms of remuneration, Cheng reports: “Joyce is making $4000 a day with a total cap of $40,000, while McCully ($2200 a day), English ($2500 a day) and Sowry ($2000 a day)”.

Cheng suggests that these appointments might appear to be “nepotism”. But he also puts forward some arguments in favour of these political employments: “Former ministers and parliamentary workers have unique knowledge and experience of how the Beehive and wider government works, as well as how it engages with the private sector and overseas entities. And if they’ve been intricately involved with a party that’s now in government, they probably have a good idea of the intended direction of travel – and wholeheartedly agree with it.”

Fast Track Bill conflicts of interest

One of the most contentious reforms of the new government is the Fast Track Approvals Bill, which looks likely to be passed through parliament soon. This has been strongly criticised for its potential to enable corruption via lobbying and political donations.

Key to the bill’s operations is the government’s six-member “independent advisory panel” that has been selecting the various business cases to be added to the legislation for fast-tracking. But has this been stacked with cronies with conflicts of interest?

The Herald’s business investigative journalist Kate MacNamara has been carrying out excellent research into the panel members. Her latest article on this, focuses on Rosie Mercer, who appears to have been appointed to the panel by Regional Affairs Minister Shane Jones. He appointed her, originally to a panel to advise on the $3bn being distributed by the Provincial Growth Fund in 2018. She was then appointed in 2020 onto the Covid-era Infrastructure Reference Group. And, since 2022 she’s been a director of Crown Regional Holdings Ltd – which will now advice Jones and his colleagues on the new $1.2b Regional Infrastructure Fund.

When Mercer isn’t busy with the state appointments, she runs the Northland company Marsden Maritime Holdings, which owns half of the Marsden Point Northport in Whangārei. And Northport was an early applicant for the Fast-Track process. This creates something of a conflict of interest, which Kate MacNamara explored in her article last week, reporting that Mercer had to step down from the panel while they considered the bid made by the company she was associated with.

MacNamara quotes me, arguing that Mercer has a much greater conflict of interest than the government appears to have allowed for – because as both a panel member she had “inside information and connections” which could have assisted the Northland company’s bid. I’m quoted saying, “that’s simply not acceptable in any democracy that wants an even playing field for business”, and that she should [not] have been involved in any of the Fast Track processes.

I’m quoted saying: “really just being both a bidder and a judge of the [other] bids is incompatible. If the public is to have any confidence in the process then Mercer should have chosen which role she was going to keep. To stay on the panel, she really should have stepped down from her chief executive role at Marsden Maritime for the period that the fast-track bid was being developed and decided upon”.

Robert MacCulloch, professor of economics at the University of Auckland, also makes some similar points in the article, suggesting that it should have been Treasury – which doesn’t have commercial conflicts of interest – making the recommendations to Cabinet: “This whole process of panels is thoroughly politicised, and it’s not necessary. There are 644 Treasury staffers. Have the Treasury or the Infrastructure Commission evaluate and rank projects, ideally they’d use cost-benefit analysis and the Cabinet could choose projects from that ranking… If the ranking is released then the public can see where politicians deviate from it, and then, of course, they have to explain themselves.”

There’s been other journalists looking at the other political appointees on the Government’s “independent advisory panel”. Andrea Vance detailed some of them:

Vaughan Wilkinson has a long association with Jones. A former Simunovich Fisheries executive, he is now a general manager at Sanford. The seafood company was invited by Bishop to apply for fast-track. Murray Parrish has worked in the forestry industry since the early 1990s. David Hunt is an economist, and Mark Davey a Hamilton planner once elected to an Auckland local board on a fiscally conservative ticket backed by the National Party.

In terms of remuneration, Vance says: “these are cronies paid between $1200 and $1600 per day to write the law”.

Official processes needed

There is nothing intrinsically wrong with political appointments. And they have their place in New Zealand’s Westminster-derived constitution. As other commentators have noted, sometimes a Government does need to put their own trusted personnel into certainly selected positions.

Yet, there’s been a growing concern that the ability of governments to appoint their favourites is being done too often and too egregiously. Quite simply, the integrity of the New Zealand public service is challenged by these appointments if they are too frequent and questionable in quality.

There also needs to be a proper process. And it’s not clear this happens at the moment. The Government’s political appointments are generally made via their Cabinet’s Honours and Appointments Cabinet Committee. But this doesn’t mean that the public should be assuaged that there is integrity in all these decisions. Unfortunately, this committee still operates under very loose and opaque conditions. A lack of transparency exists. And it’s often clear that the appointments don’t occur in an open and contested process.

When the Minister of Education Erica Stanford appointed Murray McCully as an independent reviewer into the state of school buildings, eyebrows were raised. After all, 1News reported their backgrounds: “Before entering politics, Stanford worked for McCully in his East Coast Bays electorate office for four years and has previously described him as her political mentor.” And on TVNZ’s Q+A earlier in the year, Stanford explained her logic in hiring McCully: “He is my old boss. I couldn’t think of a better person… He’s excellent. He knows the machinery of government. He’s been working in Northland on major infrastructure projects that have been delivered on time and on budget.”

Reform is required

Six months before becoming PM, Christopher Luxon clarified that he valued having a non-politicised public service. He explained: “In New Zealand we want to have an impartial public service. It’s really important. We don’t believe in an American, politicised public service where we make appointments each time under each successive government.”

Yet, under Luxon’s watch, the politicisation of the public service appears to be continuing, especially via political appointments. Prof Robert MacCulloch, of Auckland University’s Economics department says: “We’re descending into third world status whereby the politically well-connected get all the top jobs… Between National and Labour, we ain’t no meritocracy anymore”.

In other countries, the “revolving door” of former ministers going into problematic public and private roles is carefully regulated. For instance, in the UK, the Advisory Committee on Business Appointments was established precisely for this purpose. Former ministers are required to seek the advice and consent of this group before taking up any new role that might relate to politics and business.

Then in terms of the appointments to positions of significant power and influence, there needs to be some mechanisms to ensure probity has occurred in appointments. The Public Service Commission needs to adopt appointment processes to ensure that the public can have confidence that all appointments are done on merit, regardless of political affiliations. A transparent process of publicly-advertising positions, and then an independent process to short-list qualified candidates needs to occur.

Maybe it’s time, therefore, to establish an Integrity Commission that can carry out these processes. At the moment, there simply doesn’t appear to be enough scrutiny to give the public adequate confidence in the appointments process.

A New “Crony Watch” is needed

One newspaper used to run a weekly “Crony Watch” column, detailing the latest political appointments and developing conflicts of interest. This stared at the National Business Review in 2005, during the Helen Clark administration.

It’s published mission statement at the time was: keeping an eye on political appointments, “given the government’s brazen practice of appointing its close friends to sensitive and ideally impartial boards and organisations.”

According to former NBR journalist Nick Grant, Crony Watch fizzled out at the start of the John Key government, when prematurely it was deemed that the cronyistic impulses were being suppressed. But the NBR revived temporarily in 2014, and then for a while under the new Jacinda Ardern and Winston Peters government of 2017 – with an intention to lift the rocks “in search of evidence of jobs for the boys, girls and gender nonconforming”.

It seems time for another version of “Crony Watch” to be run somewhere. And I’m sure the public will be aware of many other appointments (and this can be crowdsourced into a list). Here’s three more I’ve noticed recently:

Last month, former National MP Lawrence Yule started a new job as Crown Manager to Hawke’s Bay Regional and Wairoa District Councils. He was appointed by Local Government Minister Simeon Brown.
Sport and Recreation Minister Chris Bishop has recently appointed former two-term National MP Harete Hipango to the Sports Tribunal of New Zealand.
Justice Minister Paul Goldsmith has appointed National Party member Sunny Kaushal, as head of a new ministerial advisory group to tackle retail crime.

Learning from Britain’s crony crisis

What’s currently happening in Britain should be a warning for the New Zealand political class. It appears that the public has suddenly proven less willing to put up with cronyism than the new government seemed to expect. The outcry has been very loud.

In one of the central parts of the scandal, in which a Labour Party fundraising businessman was given a top job in the Treasury, the Labour government has had to reverse the appointment. And security access to 10 Downing St, which was given to a millionaire donor, has had to be revoked.

An editorial in the Times has complained that voters deserve more than a “chumocracy by stealth”. And a consensus of commentary is starting to be established that “this lot is as unethical as the last lot”. So, despite Starmer coming to power on a promise to “clean up our politics” and to restore “standards in public life with a total crackdown on cronyism”, he’s now widely called a hypocrite.

Prime Minister Starmer can claim that his new government is just doing the same as their predecessors, but that doesn’t seem to cut with a very disgruntled public. Prime Minister Luxon should take note.

Dr Bryce Edwards

Key Sources

1News: Erica Stanford says no issues appointing her old boss to inquiry job

Benedict Collins (1News): Government denies it’s delivering ‘jobs for the boys’

Derek Cheng (Herald): Which former National MPs have been chosen for important government positions? (paywalled)

Kate MacNamara (Herald): Fast-track bid from Northport sparks debate over Marsden Maritime CEO Rosie Mercer’s involvement (paywalled)

Rowena Mason, Jessica Elgot and Eleni Courea (the Guardian): Furore over Labour cronies’ no worse than Tories’ in government, allies say

The Spectator: Starmer’s ratings hit record low as cronyism row continues

Andrea Vance (the Post): Is rebooted fast-track a law written by the Government’s (paywalled)

This article was originally published on the author’s Substack.